DATE: January 15, 1998 | LETTER NO.: 98-CU-2 |
TO: FEDERALLY INSURED CREDIT UNIONS
SUBJECT: Year 2000 Contingency Planning
Execution of major projects seldom proceeds
exactly as planned. Credit unions may need to deviate from their
original Year 2000 plans, to some degree, and employ alternate
means to achieve Year 2000 compliance. With a fixed, immovable
date for achieving compliance, credit unions must not wait until
problems arise to explore alternate solutions.
Contingency planning is a critical part of
resolving the Year 2000 issue. Contingency plans should set forth
alternate strategies to address all aspects of the Year 2000 project.
Written contingency plans need to contain options and fully researched
specific action steps that management will implement in the event
that any components of the credit union's Year 2000 plan fail.
During the assessment phase, credit unions
should have identified more than one option available as a solution
to its Year 2000 data processing needs. One of these options,
while probably not the first choice, may be a good candidate for
a credit union's contingency plan, i.e., "Plan B."
Simply put, the Year 2000 project team, senior management, and
board should agree upon a date by which another course of action
will be taken if it is not likely that the original plan is attainable.
After identifying a good alternative solution, the credit union's
contingency plan should be documented in enough detail to include,
at a minimum, the: (1) planned date of execution, (2) estimated
time to implement, and (3) estimated cost to implement.
As with the original plan, the credit
union should strive to implement the new, compliant system (identified
in your contingency plan) in sufficient time to adequately test
the system. For example, credit unions that rely on an in-house
developed system may plan to renovate their systems in order to
ensure Year 2000 compliance. During its fix, a credit union may
run into difficulties that may negatively impact its ability to
renovate the system. In this case, there should be a predetermined
date by which the credit union should decide if it can indeed
make the fix. As the date approaches, the project team may have
fallen behind schedule and determined that they are unable to
meet critical milestones and deliverables. Therefore, it may
be necessary for the team to forego the renovation option and
go to Plan B. Instead of renovation, the team may have previously
decided that the contingency plan is to purchase a commercial
off-the-shelf (COTS) application. As part of the contingency
planning process, the credit union should have already identified,
reviewed, and analyzed several COTS applications, and ranked those
systems in order of preference, based upon credit union operations
and needs.
Similarly, the credit union may be relying
on a vendor's fix. If the vendor does not provide a satisfactory
response as to its date of compliance or facilitate the testing
of the fix by a predetermined time frame, the credit union may
also have to revert to Plan B. The contingency plan may also
be to purchase a COTS package.
Knowing when to revert to Plan B will
be key as the timing could affect whether the credit union is
in compliance in sufficient time to ensure adequate Year 2000
processing.
Contingency plans should address the following
areas:
NCUA expects credit unions to address contingency
planning in their Year 2000 Plan. NCUA also expects those plans
to be sufficiently detailed to ensure that the credit union achieves
Year 2000 compliance. Finally, NCUA expects credit unions to
implement their system contingency plans as outlined in their
overall Contingency Plan. If you have any questions, please contact
your examiner, NCUA regional office, or state supervisory authority,
in the case of state chartered credit unions.
/S/
Norman E. D'Amours
Chairman
EI